From Inflation to Benefits: What the CPI Reveals About the 2026 COLA

Federal retirees could see a 2.8% COLA boost in 2026—September’s CPI will decide the final increase in benefits.

Closing in on 2026 COLA

The inflation figures for August are now in. In October, the 2026 cost-of-living adjustment (COLA) will be finalized and announced. The August Consumer Price Index (CPI) report will impact the amount of the 2026 COLA for federal retirees and those receiving Social Security benefits.

Today’s CPI report is also one last inflation reading before the Federal Reserve’s meeting next week. The current expectations are that the Federal Reserve is likely to resume lowering interest rates in response to a labor market that is showing signs of slowing.

The expectations of economists were that the CPI would rise 2.9% for the last 12 months through August. That turned out to be the exact reading in the latest report.

Note that the CPI-W is the index used to calculate the annual COLA for the next year. That index is discussed below for the COLA calculation.

The overall inflation amount of 2.9% as announced by the Bureau of Labor Statistics is based on a different statistic using slightly different data. And, for those who may be wondering, the CPI-W does sometimes result in a lower COLA payment than the actual inflation amount that is announced for the year and which appears in headlines concerning the inflation for the year.

Here is how the COLA calculation works:

• CPI-W readings are taken from the third quarter (July – September).
• These data are compared to the average CPI-W reading from the previous year’s third quarter.
• The average reading from the current year’s third quarter (2025) is compared to the figure from the third quarter of 2024.
• If the average CPI-W reading increases in 2025, then the difference, rounded to the nearest 0.1%, represents the increase in benefits that beneficiaries will receive in 2026.
• If the figure is lower— indicating deflation—no adjustment is made. That happened several times under the Obama administration. Deflation has not occurred in 2026 so it is highly unlikely this will occur for the 2026 COLA.

What Does the Latest CPI Data Reveal About the 2026 COLA?

Through August, the CPI-W increased 2.8% over the last 12 months to an index level of 317.306. When the CPI-W is calculated for the final tally using the September data, the index level will change from 317.306 to the number announced by the BLS next month.

The average CPI-W for the third quarter of 2024 now stands at 308.729—an increase of 2.77%.

Since the 2026 COLA requires the average of all three months (July, August, and September), the final COLA percentage may shift. It will depend on how the September 2025 CPI-W compares to the current data:

• If September is similar to August (~317), the average for the quarter could remain close to 317, suggesting a COLA that will be about 2.8%.
• If September inflation is notably lower, the quarterly average—and the COLA—might fall below 2.8%.
• If inflation is higher in September, it could push the average—and potential COLA—into the high-2.8% to low-2.9% range.

If September holds steady, expect a 2026 COLA of approximately 2.8%, possibly rounding to 2.8% when finalized and applied in December 2025 (benefits payable starting in January 2026).

Summarizing Recent COLA Amounts

Here is a quick summary of the COLA percentage increases over the past ten years.

The 2026 COLA projection is about 2.8%. The actual increase will be calculated with the September CPI data, which will be calculated in October 2025.

The 2026 COLA is:

• Higher than the smaller adjustments of 2016–2021 (which ranged 0.0–2.0% most years).
• Similar to 2019’s COLA (2.8%), when inflation was relatively stable.
• Much lower than the spike years of 2022 (5.9%) and 2023 (8.7%), when inflation surged.
• Slightly below the 2024 increase of 3.2% but higher than 2025 (2.5% increase).